Textron 2020 Proxy Statement

TEXTRON 2020 PROXY STATEMENT 37 TAX CONSIDERATIONS Section 162(m) of the Internal Revenue Code provides that no U.S. income tax deduction is allowable to a publicly held corporation for compensation in excess of $1 million paid to a “covered employee” (generally the NEOs). Under the tax law applicable in 2017 and prior years, “performance-based compensation” was exempt from the $1 million limitation if it was payable upon meeting pre-established and objective performance goals established by the Committee under a plan that had been approved by shareholders and other tax code requirements were met. In addition, under prior law the principal financial officer was not treated as a covered employee. In December 2017, the Tax Cuts and Jobs Act (the “Tax Act”) eliminated the exemption from Section 162(m)’s deduction limit for performance-based compensation, effective for taxable years beginning after December 31, 2017, unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. In addition, the Tax Act broadened the list of covered employees to include the principal financial officer. As a result of the Tax Act, beginning with our 2018 tax year, compensation paid to our named executive officers, including performance-based compensation, in excess of $1 million generally will not be tax- deductible, with the exception of certain compensation payable under arrangements in place as of November 2, 2017. Because there are uncertainties as to the application of regulations under Section 162(m), as with most tax matters, it is possible that deductions we may claim for compensation payable under arrangements in place as of November 2, 2017, as well as deductions for performance-based compensation we have claimed prior to our 2018 tax year, may be challenged or disallowed.